TWS OptionTrader Webinar Notes

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Please feel free to contact us if your question is not addressed on this page or to request the addition of a question and answer. How do I provide exercise instructions? Do I have to notify IB if I want my long option exercised? What if I have a long option which I do not want exercised? What can I do to prevent the assignment of a short option?

Is it possible for a short option which is in-the-money not to be assigned? What happens if I have a spread position with an in-the-money option and an out-of-the-money option? Can IB exercise the out-of-the-money long leg of my spread position only if my in-the-money short leg is assigned? What happens to my long stock position if a short option which is part of a covered write is assigned?

Am I charged a commission for exercise or assignments? What happens if I am unable to meet the margin requirement on a stock delivery resulting from an option exercise or assignment? In the event that an option exercise cannot be submitted via the TWS, an interactive brokers options expiration effects exercise request with all pertinent details including option symbol, account number and exact quantityshould be created in a ticket via the Account Management window.

The ticket should include the words "Option Exercise Request" in the subject line. Please provide a contact number and clearly state in your ticket why the TWS Option Exercise window was not available for use. In the case of exchange listed U. In these situations, IB interactive brokers options expiration effects make every effort to provide advance notice to the account holder of their obligation to respond, however, account holders purchasing such options on the last day of trading are not likely to be afforded any notice.

If it interactive brokers options expiration effects in-the-money by at least that amount and you do not wish to have it exercised, you would need to provide IB with contrary instructions to let the option lapse. The only action one can take to prevent being assigned on a short option position is to buy back in the option interactive brokers options expiration effects to the close of trade on its last trading day for equity options this is usually the Friday preceding the expiration date although there may also be weekly expiring options for certain classes.

When you sell an option, you provided the purchaser with the right to exercise which they generally will do if the option is in-the-money at expiration. While is unlikely that holders of in-the-money long options will elect to let the option lapse without exercising them, certain holders may do so due to transaction costs or risk considerations.

In conjunction with its expiration processing, OCC will assign option exercises to short position holders via a random lottery process which, in interactive brokers options expiration effects, is applied by brokers to their customer accounts. It is possible through these random processes that short positions in your account be part of those which were not assigned.

Spread positions can have unique expiration risks associated with them. Account holders are ultimately responsible for taking action on such positions and responsible for the risks associated with any unhedged spread leg expiring in-the-money. There is no provision for issuing conditional exercise instructions to OCC.

OCC determines the assignment of options based upon a random process which is initiated only after the deadline for submitting all exercise instructions has ended. In order to avoid the delivery of a long or short underlying stock position when only the short leg of an option spread is in-the-money at expiration, the account holder would need to either close out that short position or consider exercising an at-the-money long option.

If the short call leg of a covered write position is assigned, the long stock position will be applied to satisfy the stock delivery obligation on the short call.

The price at which that long stock position will be closed out is equal to the short call option strike price. There is no commissions charged as the result of the delivery of a long or short position resulting from option exercise or assignment of a U. You should review your positions prior to expiration to determine whether you have adequate equity in your account to exercise your options. You should also interactive brokers options expiration effects whether you have adequate equity in the account if an in-the-money short option position is assigned to your account.

You should also be aware that short options positions interactive brokers options expiration effects be exercised against you by the long holder even if the option is out-of-the-money. If you anticipate that you will be unable to meet the margin requirement on a stock delivery resulting from an option exercise or assignment, you should either close positions or deposit additional funds to your account to meet the anticipated post-delivery margin requirement. If an option exercise or assignment results in the delivery of a long or short stock position and the account holder does not maintain sufficient equity to meet the ensuing margin requirement, IB may liquidate positions to restore margin compliance.

Click on a question in the interactive brokers options expiration effects of contents to jump to the question in this document.

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Examples of such events are outlined below. Accounts which do not have sufficient equity on hand prior to exercise introduce undue risk should an adverse price change in the underlying occur upon delivery.

To protect against these scenarios as expiration nears, IB will simulate the effect of expiration assuming plausible underlying price scenarios and evaluating the exposure of each account assuming stock delivery. If the exposure is deemed excessive, IB reserves the right to either: In addition, the account may be restricted from opening new positions to prevent an increase in exposure. The effect of any after hours trading you conduct on that day may not be taken into account in this exposure calculation.

IB is under no obligation to manage such risks for you. To protect against these scenarios as expiration nears, IB will simulate the effect of expiration assuming plausible underlying price scenarios and evaluating the exposure of each account after settlement.

For instance, if IB projects that positions will be removed from the account as a result of settlement e. If IB determines the exposure is excessive, IB may liquidate positions in the account to resolve the projected margin deficiency.

Account holders may monitor this expiration related margin exposure via the Account window located within the TWS. This exposure calculation is performed 3 days prior to the next expiration and is updated approximately every 15 minutes. Note that certain account types which employ a hierarchy structure e.

In addition, liquidations are prioritized based upon a number of account-specific criteria including the Net Liquidating Value, projected post-expiration deficit, and the relationship between the option strike price and underlying. In the event that you are holding a call spread long and short calls having the same underlying prior to an ex-dividend date in the underlying, and if you have not liquidated the spread or exercised the long call s , IB reserves the right to: In the event that IB exercises the long call s in this scenario and you are not assigned on the short call s , you could suffer losses.

Likewise, if IB liquidates some or all of your spread position, you may suffer losses or incur an investment result that was not your objective. In order to avoid this scenario, you should carefully review your option positions and your account equity prior to any ex-dividend date of the underlying and you should manage your risk and your account accordingly. With the exception of certain futures contracts having currencies as their underlying, IB generally does not allow clients to make or receive delivery of the underlying for physically settled futures or futures option contracts.

To avoid deliveries in an expiring contract, clients must either roll the contract forward or close the position prior to the Close-Out Deadline specific to that contract a list of which is provided on the website. Call Spreads in Advance of Ex-Dividend Date In the event that you are holding a call spread long and short calls having the same underlying prior to an ex-dividend date in the underlying, and if you have not liquidated the spread or exercised the long call s , IB reserves the right to: Physically Delivered Futures With the exception of certain futures contracts having currencies as their underlying, IB generally does not allow clients to make or receive delivery of the underlying for physically settled futures or futures option contracts.